First Mariner faces deadline to raise capital

Hanah Cho, The Baltimore Sun

Seven months after First Mariner Bancorp struck a cash-infusion deal that Chairman Edwin F. Hale Sr. characterized as a "significant milestone" in the struggling Baltimore company's efforts to raise its capital levels, a second deadline has come and gone, leaving no clear picture of the bank's progress.

In April, New York investment firm Priam Capital agreed to provide $36.4 million in exchange for a 25 percent ownership stake in the parent company of 1st Mariner Bank.

But the investment came with a large string attached: First Mariner would have to raise an additional $123.6 million from other investors.

Faced with a Wednesday deadline to come up with the money — a date that, if missed, would allow either party to walk away from the deal — First Mariner and Priam remained quiet.

Priam's senior partner, Howard Feinglass, a Baltimore native, did not return a phone call Wednesday. First Mariner declined to comment.

If Priam Capital bows out of the deal or if the deadline is extended again, First Mariner must make the news public.

Given shaky economic conditions, banking analysts say raising new capital is a challenge and a drawn-out process, especially for institutions that have run into trouble.

"People out there who would be providing sources of capital to First Mariner are probably scrutinizing their business and talking to folks and doing their own due diligence," said Clifford Rossi, a former bank executive at Citigroup who now teaches at the University of Maryland's Robert H. Smith School of Business. "They want to be really careful on whether that institution has the ability to be able to withstand future problems."

When First Mariner did not meet a deadline of Sept. 1 to raise the money, Priam and First Mariner agreed to extend the timeline to Nov. 30. At the time, Feinglass said his company remained committed to the transaction.

Under the revised agreement, First Mariner is also permitted to seek another partner or find an alternative deal.

Hit hard by the mortgage crisis, First Mariner has been trying to raise money since September 2009, when federal regulators ordered the company to shore up its capital and deal with problem loans.

The company is still reeling from the uneven real estate market. First Mariner posted a $7.9 million loss in the third quarter as it continued to write down the value of distressed properties.

Pressured onseveral fronts, First Mariner continues to face an uphill fight, said James D. Hardesty, chairman of Hardesty Capital Management in Baltimore.

"What it needs is a break — an improved economy that might help restore some of their nonperforming loans to performing status," said Hardesty, a former bank executive at the old Mercantile Safe Deposit and Trust Co. "And that could embolden a potential financial angel to come forward with a better offer than has so far been put on the table by Priam Capital."

But "both of these conditions don't seem to be likely because the current economic data is not suggesting that the recovery that we all want desperately is at hand," he said.